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Announcement:

Moody's updates its methodology for insurance hybrid ratings

Global Credit Research - 12 Jan 2010

Limited impact on insurance hybrid ratings

London, 12 January 2010 -- Moody's Investors Service has published its updated methodology for rating the hybrid securities and subordinated debt instruments issued by insurers. The rating of one security potentially affected by the updated methodology will be placed on review for possible downgrade, announced via a separate press release today.

The methodology on insurers follows the revised methodology for bank hybrid ratings issued in November 2009. Moody's emphasizes that there will not be significant implications for insurance hybrid ratings given that the number of securities affected in the sector is extremely limited.

"Revisions to the bank hybrid rating methodology largely eliminated assumptions of systemic support for these instruments. These changes do not affect insurance hybrids because we had never assumed such support for insurers," says Paul Oates, a Moody's Vice President-Senior Analyst in the insurance group. "Furthermore, the hybrids of the insurers were already rated further below the baseline ratings than those of banks."

The methodology discusses the changes previously made to bank securities and the applicability of these changes to insurers. Moody's says the only adjustment to notching guidelines for insurers in the revised methodology published today regards preferred securities that have a non-cumulative meaningful mandatory coupon skip mechanism. The number of securities issued with this structure is extremely limited.

While Moody's updated methodology provides a broad framework for rating hybrid capital and subordinated debt, the analysis will be complemented by case-specific credit considerations. In particular, securities issued by bancassurance groups may be rated with reference to both the bank and insurance guidelines.

Moody's is also looking at the need to revise the equity credit it attributes to hybrids in its leverage calculations. As part of this review, greater equity credit may be given for deeply subordinated, non-cumulative instruments, while less may be given for hybrids without these features. The rating agency notes however that the impact of any such changes on insurers' financial strength ratings (IFSR) is likely to be limited. The rating agency intends to issue a Request for Comment on this issue in the coming weeks.

The report, "Moody's Guidelines for Rating Insurance Hybrid Securities and Subordinated Debt", is available on www.moodys.com.

* * * *

NOTE TO JOURNALISTS ONLY: For more information please contact New York Press Information +1-212-553-0376; EMEA Press Information in London +44-20-7772-5456; Juan Pablo Soriano in Madrid +34-91-310-1454; Alex Cataldo in Milan +39-02-914-81-100; Eric de Bodard in Paris +33-1-5330-1020; Detlef Scholz in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7-495-228-60-60; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-2916-1150; Hector Lim in Sydney +612 9270 8102; Luiz Tess in São Paulo +5511-3043-7300; Alberto Jones Tamayo in Mexico City +5255-1253-5700; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; Leon Claassen in Johannesburg +27-11-217-5470; Jehad el-Nakla in Dubai +971 4 401 9536; or visit our web site at www.moodys.com

London
Simon Harris
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Paul Oates
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's updates its methodology for insurance hybrid ratings
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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